Marketing plan development and implementation strategy

Marketing Plan

Benetton is a textile and apparel manufacturer established in Italy in 1965. In less than 50 years, the group evolved into a world known fashion designer, mostly famous for its unconventional and controversial advertising focused on raising awareness on social issues characterizing the modern society, such as: racism, homosexuality and anorexia.

Market size

The group manages more than 300 shops in 120 countries, employing almost 9,000 employees as of 2007-year end (Annual Report, 2008).

Benetton manages 4 important brands: United Colors of Benetton - for casual fashion; Sisley and Playlife - for glamour fashion; and Killer Loop streeware - for college style. The yearly production extends to 160 million garments distributed in its own shops and those of independents partners, that build a netword of over 5,500 contemporary stores and generating a revenue superior to €2 bn.

PEST analysis

Political and legal environment. Europe is by far the company's largest market. The textile and apparel industry is regulated at the European Union level in most of these countries. Following the clothing and textile trade liberalization in 2005, the European and manufacturers' exposure to low-cost Asian imports had increased cost/price pressure exponentially. The need for cost efficiency forced both manufacturers and retailers to re-thing their operational activity. An accurate analysis of the legal framework of the economic block suggested that none of the manufacturing member countries provided for ad-hoc laws about terms and conditions concerning manufacturer-retailer relationships of the textile and apparel industry (Bocconi, et.al. 2007). The consolidation of China's position as world leading clothing and textile manufacturer increased pressure on U.S. markets as well, forcing many manufacturing firms to either close or relocate to Asian low-cost production locations.

Unlike Asian markets, the European and American ones are strictly regulated in terms of labor framework. Thus, retailers and manufacturers in these two areas are likely to incur substantially higher costs related to overtime and workload.

Economic environment. The clothing prices have shown stability across Europe despite the steady increase of overall prices in the region. Consumption patterns started to change, families started to allocate a lower proportion of their income for clothing due to outlets and seasonal sales increased popularity. During the same period, hypermarkets, such as Tesco and specialty chains, such as Zara and H&M rose at the expense of department stores and small traditional shops and the competition between them intensified.

As cost efficiency is a major concern in the clothing and textile industry nowadays, two separate trends have been identified in the manufacturer - retailer relationships. The first reflects increased involvement of the retailers in the upstream activities along the value chain, such as textile procurement, design and logistics and the second comes as a reaction to the first, reflecting the manufacturers' increased interest in offering a wider range of services to their downstream customers and up to the involvement in activities such as branding and retailing.

In recent years, clothing market in U.S. has shown a relative decrease on prices. Thus, clothing prices fell 9.6% across the country between 1993 and 2003, while Consumer Price Index increased 27.3% over the same period of time (U.S. Bureau of Labor Statistics, Accessed January 2009).

Social environment. Europe and U.S. are modern societies in which the role of working women in the working environment increased substantially in the last 30 years. Women work alongside men in almost all professions and their image adapted to these changes. Thus, women are more concerned with their professional image more, than with their domestic one. The women clothing style nowadays reflects the working woman lifestyle, on one hand with casual and sports features to fit a dynamic attitude, but also with elegant and chic elements that characterizes and the women emancipation.

The increasing education level in U.S. And Europe, together with the more restricted labor legislation regarding workers' rights has determined many manufacturers with factories in these regions to relocate their units in locations with lower costs and more flexible labor market restrictions. Due to the same reasons, the professional trend in the former regions has slowly migrated towards more highly-skilled professions in the service industries, rather than manufacturing.

Technological environment. The textile and clothing industries evolved a lot in the last decade in terms of technology. These industries are limited technologically-wise by the specifics of their activity. However, the increased globalized competition forced both manufacturers and retailers to create efficiency-generating innovations. The application of modern management techniques, such as lean manufacturing or retailing is a must for these companies.

Lean manufacturing or lean production is a manufacturing that aims to optimize the expenditure of each resource, thus products for the end user are manufactured keeps waste levels at minimum. Lean retailing is a logistic tool that enables retailers to track products through bar codes and generate reports based on those. The reports are later used to manage stocks, place orders in real-time and distribute products from storage to different store locations.

The increased internet penetration and cable TV has facilitated increased opportunity for internet purchase and teleshopping. Although, the European consumers still prefer to purchase clothes from a physical location, the American ones prefer more and more the online shopping. The costs related to an online shopping infrastructure are significantly lower than the traditional one. Therefore, many retailers these days are working on having one in place or improving the existing one.

Demographics. The following trends have been observed in the last years: (a) mature markets are characterized by ageing population with increased income levels; (b) single households increased at the expense of family households in mature markets; - increased standard of living in developing countries; (d) increased concern for ethical consumption in urban areas; and (e) increased awareness regarding environmental, social and health issues mainly generated by media coverage.

The consumer

Benetton covers a wide range of age segments, from kids to adults. The Italian manufacturer focuses on design and layout/color, rather than product quality. Its collections are addressed to a public made of simple consumers - children, teenagers - through the United Colors of Benetton collections, more sophisticated ones - mainly adults - through Sisley collections and to street, unconventional ones - mostly young people - through its Killer Loop collections.

SWOT analysis

Strengths. Benetton is a world known manufacturer and marketer of distinctive knitwear and casual clothing for kids, men and women. The company enjoys a good image and reputation, being especially appreciated for being the voice of many social causes and raising awareness on current social issues, such as racism.

Weaknesses. Some of the company's controversial advertising campaigns may offend end customers, which is a good reason for retailers to terminate their contracts with the Italian manufacturer with no prior warning. Additionally, the price-quality ratio is perceived as low on both sides of Atlantic: in the U.S., the products are sold in Sears, which is knows for high quality products and in Europe the prices very high.

Opportunities. Since the company's market share in the U.S. is low, expanding the operations there constitutes growth opportunity. Also, increased geographic diversification makes the company less vulnerable to the volatile economic environment.

Threats. As market saturation is increasing, the competition becomes tighter (Ralph Lauren, Tommy Hillfiger, Nautica, Calvin Klein, etc.).

Costumer motivation and market segmentation

Consumer motivation

Consumers buy clothes to fulfill a basic need, that of getting dressed and a social one, that of building a certain image of him/herself in society.

Market segment

Benetton manufactures and retails clothes, accessories, shoes and fragrances to customers that are fashion oriented and who belong to different age segments: kids, women and man, mostly under the age of 40.

Market size

Buying clothes is a basic need for any human being; therefore Benetton's potential market is quite large. However, the company's products are addressed to certain market segments, which represent between 30% and 50% of the population. European Union alone is the home for almost 500 million people and America add roughly another 300 million to that. If we were to consider that only 30% of this population would be Benetton's target market and only 10% of the segment would consider buying from this Italian designer, rather than the competition, the company would still be able to count on roughly 25 million individuals as potential customers.

Financial marketing and customer objectives

Benetton is looking to expand or strengthen its operations in both the emerging and mature markets. Thus, the expenses related to transport and distribution on one hand and advertising and promotions on the other hand are a significant part of the general operating expenses. The former item was 6.6% of the gross operation profit in 2007 and the latter was 11.7% of the operational expenses in the same year.

For 2008, the company planned to open 50 additional stores dedicated to young children and new mothers and 35 stores in Europe dedicated to beachware, underware and nightware under the Gloss concept. Additionally, the Asian markets are considered strategic, the company opening the 100th store in Russia and managing 150 stores in India in the same year.

Marketing strategy

Overall Marketing Strategy

The group's marketing strategy is focused on raising awareness on social issues concerning today's society and taking a stance of the real world, rather than encourage costumers to buy its products.

Competition

Considering the large product diversification characterizing Benetton's portfolio, it is very difficult to define the manufacturer's main competitors, as it's difficult to define it's industry. Thus, according to Hoovers.com (Accessed January 2009), the company's top 3 competitors are: Inditex, GAP and H&M. Inditex is a Spanish based, clothing group, which is considered to be Benetton's main competitor as it designs and retails its own products. It is also a global company managing over 3,690 stores in 68 countries. GAP is an American-based company with 4,250 stores worldwide. Unlike the Italian company, GAP doesn't manufacture its products, being responsible only for the retailing part. H&M is a Swedish-based company with over 1,500 stores in 28 countries.

Marketing mix

Product

Benetton has often been labeled as the fast food of fashion, or better said McFashion. Luciano Benetton himself, the company owner, clearly distinguishes between the artistic fashion of Italy and France, such as Armani or Chanel, and Benetton which he refer to as industrial fashion. Nevertheless, the company's competitive advantage relays in its ability to understand the key success factors behind the McFashion business.

Benetton's product strategy is a global one. The same garments are sold across countries in the same small boutique-style shops, which follow strict corporate merchandising guidelines, and are promoted by print media using identical advertisements worldwide. This is a total look strategy involving color coordinated garments, rather than individual products.

Price

Around the year of 1995, Benetton adopted a price reduction strategy at worldwide level. This strategy was meant to enable the company to guarantee its customers a both more suitable and competitive supply of products. The price reduction was simultaneously joined by decreased production costs. The two actions resulted in an 8% increase in goods sold. Nowadays, the company has different price levels across countries and brands. Thus, in Europe the average prices are higher than U.S., but in the same time some brands such as United Colors of Benetton are priced substantially lower than others such as Sisley who is addressed to a more sophisticated market segment.

Benetton also has an extended system of outlet stores in which its products are sold at large discounts. The products sold in these stores are usually from prior collections and the use of large discounts is meant to stimulate customers to buy collections that are slightly expired, thus avoiding additional inventory costs.

Place

In the late 1990s - early 2000, the Italian manufacturer restructured its distribution network by implementing a new logistic system in which the warehouses became part of a centralized distribution system, rather than just being simple storing facilities. This system was much more efficient logistic-wise as it reduced the fragmentation of inventories at international lever by concentrating the finished goods in 3 centers, one in the U.S., one in Italy and one in the Far East. Initially, the automatic distribution system handled over 30,000 packages a day and was managed by a 10-member staff, while a traditional one would requires a staff of 400 for the same workload. In 1996, the implementation of this new system resulted in roughly €5 million savings in transportation costs.

An efficient production system was added to improve logistics efficiency. The company worked on developing an advanced dyeing process, which would enable the finished product to be dyed instead of dying the yarn first. Thus, the manufacturer was able to run an efficient customized production system, always updated with the latest market trends in the fashion industry in which tastes in color change very often.

Promotion

Benetton's promotion strategy reflects the company's desire to create images of global concern for its global customers. This strategy is well-known for targeting issues rather than clothes as the company believes it is more important for companies to address a current important issue of today's society, rather than use their advertising budget to convince consumers that they will be happy if they purchase of their products. Thus, Benetton managed to attract substantial attention from the public and stand out in its industry in terms of social responsibility.

The means involved in the company's promotional activity include: (1) sport and event sponsorship, (2) Colors magazine, (3) Fabrica project, (4) image advertising and (5) controversial campaigns.

Benetton sports system changed its name to Playlife in 1998. This division manages famous brand names, such as Prince, and reflects the Group's involvement in the sports related activities, covering a wide range of sports from skiing to tennis. The Italian manufacturer sponsors basketball, rugby, volleyball, motorcycling and Formula One teams, which is one of the reasons why many young athletes chose Benetton products to be their favorite sports brand. Additionally, the company is involved in developing sports facilities success in communicating through sports can be seen by its efforts in developing sport facilities.

Colors magazine is a bi-monthly publication which is distributed in 6 bilingual editions in 3 continents.

The Fabrica project is both a workshop environment and a center of communications in which a group of 20 students from the field of communications from various countries research future trends and new ideas.

One of the specific features of Benetton's image advertising is that its images do not include a product, but only the company logo. Moreover, its adds to not suggest customers to buy its products. These are designed to increase awareness regarding global issues that concern today's society. As far as their products are concerned, Benetton advertises those via catalogues and fashion editorials that are displayed to consumers in the stores. Additionally, the public relations offices are in permanent contact with fashion editors in different countries across the world. These offices engage traditional marketing techniques thus making sure that the products receive an optimal exposure or sales personnel.